U.S. apartment vacancies dip as rents rise

By Lily Leung  

Friday, January 7, 2011 at 12:19 p.m.

Average rents in San Diego County

Apartment type	Fall 2010	Spring 2010	Fall 2009
Studio	$1,040	$967	$996
1 bedroom	$1,175	$1,161	$1,127
2 bedroom	$1,440	$1,444	$1,422
3 bedroom	$1,771	$1,735	$1,754

Source: San Diego County Apartment Association

More Americans are renting, a sign of continuing economic distress that's also seen in San Diego County.

Nationwide, the rate of apartment vacancies dipped to 6.6 percent in the fourth quarter from 8 percent during the same time one year ago, marking a two-year low, said Bloomberg News this week. The data is from Reis Inc., a property-research company. 

Numbers from the San Diego County Apartment Association show the same downward trend in the region. The vacancy rate fell to 4.6 percent in the fall from 5.0 percent the previous year. The association surveys 25 major apartment owners and managers twice a year, in the fall and spring.

As more rentals filled up, rents rose across the U.S. and San Diego County. In the U.S., the average monthly rent rose to $986 from $964 year-over-year, a 2.2 percent increase. In the county, rent increase ranged 1 percent to 4.4 percent in the fall.

Some local experts believe demand and prices for rentals will likely continue through 2011 and even beyond because of an already limited housing supply, the lack of new building and an upcoming wave of foreclosures. 

Bob Pinnegar, executive director of the apartment association, called this an "abnormal period" for San Diego County's rental market. He said more people are flocking to the outskirts such as El Cajon and Alpine instead of San Diego city because of cheaper rates and the willingness to commute farther.

"People are moving around based on their perception of value," Pinnegar said.

Pinnegar said the performance of the local rental market also depends on the U.S. unemployment rate, which remains high. Employment is a key indicator for rental housing, with a direct link between the unemployment rate and apartment vacancy. It dropped to 9.4 percent in December from 9.9 percent a year ago. 

That's likely a seasonal uptick, said Kraig Kast, managing trustee for Atherton Trust, which has an office in La Jolla.

"It's not necessarily a trend because the hirings are likely related to the holiday season," Kast said. "We have to wait for the numbers for January and February."

Pinnegar said the job outlook for Californians looks grim because of the state's dire budget deficit. He expects a wave of government layoffs to occur during the first part of the year.

"State dollars will be cut, and that will a challenge," he said.

Source: SignOnSanDiego.com